We’ve been hearing about the debt limit for months, but familiarity makes it sound sort of normal. That is spectacularly wrong.
We all know it would be a disaster for this country to foreclose on its debt. That would not only have massive economic impact, beyond that it would undermine international confidence in the United States for any of its commitments. That the Republican Party is playing chicken with those consequences shows just how divorced it is from the well-being of the country. What’s not to like about a forced recession in a Democratic President’s election year??
However even that doesn’t do justice to what is going on. The issues under discussion are not merely financial. McCarthy is going after specific parts of the Biden legislative agenda with his own alternatives. The debt limit fight is an effort to replace our Constitutional form of government with a new Republican agenda forced upon the country at gun point. That is not an exaggeration.
Heather McGhee begins her book The Sum of Us with the question “Why can’t we have nice things?”. And she makes clear what she means: “basic aspects of a high-functioning society, like adequately funded schools or reliable infrastructure, wages that keep workers out of poverty or a public health system to handle pandemics”.
She then goes on to explore how racism has been systematically used by the wealthy and powerful to keep that from happening—which is to say how they keep that money and power for themselves. I’m happy to promote her book, however I also want to spend a little time here on her question—on the mindset that says we can’t.
My example is Biden’s student loan forgiveness plan. I’m not going to argue the details. What I am going to argue is the senselessness of the knee-jerk reactions, i.e. how ridiculously entrenched is the idea that we just can’t have nice things.
The cost of the program was estimated by the government accounting office as $400 B, which puts it in the same ballpark as some stimulus packages. Virtually without exception that number was taken by the press at full face value. This was ridiculously, “humongously” expensive. It was going to undermine free enterprise everywhere, drive inflation, and possibly bankrupt the country. “We can’t afford things like that.”
There are two problems with that assessment. Let’s start with the $400 B number. For accounting reasons, it is for a program lifetime total taken over 30 years. That reduces the average yearly value to $13 B, which is the number to compare against stimulus packages. Except that number is itself too high. Again for accounting reasons it assumes that all current debtors will keep paying for the full period—something that has never happened in the past. Let’s take $10 B as a nice round high estimate, and compare it with another per-year item in the budget—the defense budget just passed. That number is $858 B. The humungous expense is 1% of that total. It’s not even big enough to count as a rounding error, and the inflation claim is a joke.
We’re so used to “we can’t afford things like that” that the press can’t do even that much arithmetic.
What’s more (on the free enterprise issue) that money was spent because college had become vastly more expensive precisely during the worst downturn since the Great Depression. (And the Republican legislature refused to do anything about it—hiding behind the bogus “balanced budget amendment”.) We like to talk about equality of opportunity. We, the USA, pioneered high school for all. In today’s economy college or some other form of post-secondary education has become necessary for good jobs (and bad jobs in this country won’t even get you above the poverty line!). So we’re not talking about buying televisions on credit—we’re talking about most people’s only chance at a middle class existence.
Biden’s debt forgiveness plan does not fix everything wrong with affordability of education. And it isn’t means-tested (although people who borrow are usually not rich and means tests are almost always counterproductive). But it is a step forward and addresses a real problem that was not caused (despite the rhetoric) by sheer profligacy. And the most ardent critics of the incomplete solution are the people committed to doing nothing at all.
Most galling, however, is the universal knee-jerk of “we can’t afford things like that” which can’t be bothered for even a cursory look at what’s real.
Democrats must challenge Republican lies about inflation. The Republican message is simple: “Inflation is caused by Democrat’s unrestrained spending. Elect us and we’ll stop that and fix it.” Both parts of that message are lies.
Inflation is everywhere in the world and we’re generally on the good side of average. That last Covid payment is not what turned the world upside down. We’re still fighting the product and labor bottlenecks that persist. Republicans haven’t proposed one single bit of a plan.
Furthermore, as several authors have pointed out, Republicans are anything but a safe choice. We’re not talking about the old conservative Republicans. These are Trump’s burn down the house people. With the debt ceiling blackmail, Republicans are going after Medicare and Social Security with a threat of liquidity collapse if they don’t get it. We’re going to outdo the British Conservatives with Liz Truss!
Finally it needs to be recognized that the Republican argument on inflation is just a rehashing of the usual Republican program of presents to the rich. Inflation is the lastest bogeyman to say we can’t have public services or anything else that rich people don’t want to pay for.
It has become clear from all polls that the key issue for voters in this midterm election is inflation. That’s a difficult issue for Democrats, so we have tried to make it something else: January 6, the Supreme Court, etc. The time has come to realize that all of that has failed. That’s particularly scary, because all of the crazy people we helped nominate in Republican primaries now stand a good chance of being elected—because voters view Republicans as better for the economy, regardless of how crazy a particular candidate may be.
So there is no substitute for taking on inflation as an issue. It’s not as if we have no answer for this, but the time to act is now. Please, please contribute to this. For what it’s worth l give a few points here.
Current inflation is not something created by the last stimulus checks.
Inflation is a worldwide phenomenon, and we are actually at the low end in the Western World. It is the worst in 40 years, because we haven’t had anything like Covid for many decades. Even today we have many categories of manpower shortages (e.g. women who can’t work because daycare centers were closed by Covid) and product shortages (e.g. in electronics) as well as changes in demand patterns (e.g. in real estate). Energy prices are being manipulated as we resist Russian aggression in Ukraine. We have been working to deal with all of this. There is no simple case where none of it would have happened. Further, since Republicans are pretending they can blame everything on Democrats’ spending, they have no plans to make any of it better.
There isn’t any inflationary profligate spending in the rest of the Democrats’ program
Republicans are rushing to take responsibility for results of the infrastructure bill—even in many cases where they voted against it. Most of the population recognizes that the climate measures are absolutely necessary. For student loan debt, many people seem to have been confused by the $400 B figure attached to the program. In fact this is an accounting issue, where the number is spread over decades, without any significant near-term or per year effect. It should also be noted that college tuition costs essentially doubled starting in 2008, so there is an issue to be addressed.
The current Trump Republicans are not the fiscally conservative, reliable Republicans of old. They are ready and willing to sacrifice all of us to the wild idea of the day.
The now-serious debt ceiling blackmail is a case in point. Republicans are ready to throw caution to the winds—in a very precarious world economy. Massive cuts in Medicare and Social Security would be on the block in such an effort. And forcing a US default in today’s world would create a liquidity crisis to make the Liz Truss affair look like nothing at all. Trump Republicans are also ready to tank the economy if they think that will help elect their hero in 2024.
One British observer described similarities across the Atlantic: “Like the Republicans in the United States, the Conservatives are detached from reality. In a generation, they have become a party of monomaniacs, incompetents and ideologues.” We shouldn’t be laughing about Liz Truss here.
We’re not paying enough attention. This midterm election hides a real danger of Depression. We’re stumbling into exactly what happened in the 1930’s.
The Great Depression of the 1930’s occurred when the financial authorities of the day responded to a sudden downturn with the opposite of what was needed. A straightjacket of fiscal austerity was applied (by the self-protecting upper classes) in place of the stimulation that would have enabled recovery. That shut down everything in the US and much of the western world.
We are currently fighting inflation. That’s a tough battle and will cause a slowdown that is some variety of recession. It’s what happens next that matters.
The only reason we got out of the 2008 recession was that there were enough Republicans to join Democrats in passing a stimulus package early on. Already by 2010 there were few of those Republicans left, and any further stimulus was blocked in the name of the bogus “balanced budget amendment”. The goal was national pain ahead of the 2016 election. It worked.
We’re in that situation again, but the dangers are much worse. To state the obvious, the worldwide economy is in extremely fragile state: inflation is everywhere (we’re actually on the low side), there is war in Ukraine (with direct consequences for many countries), energy prices are rising from Saudi greed, there’s even a dictatorship-induced slowdown in China, and (compared with 2008) there is very little international cooperation. Forced austerity is exactly what brought the world economy down last time, and we’re going to get it again.
For today’s Republican Party a recession is an opportunity. A Republican (Trump) Congress will do anything to bring back their hero. As in 2014 there will be no possibility of stimulus no matter how bad things get, because pain is the goal. By 2024 it will be too late for any short-term way out.
The Great Depression was so bad, that it seemed that people would always remember what happened and never do that again. Unfortunately we’re there.
I’m tired of arguments over whether Republicans or Democrats are better managers of the economy. The situation for the midterms is starker than that.
In this election cycle we are parallel to 2014, a mid-term election with an open Presidential election to follow. What did the Republican Party do with their power between 2014 and 2016? They shut down government with the “balanced budget amendment” nonsense (forgotten immediately under Trump) in order to cause national pain for the 2016 election. That is no exaggeration—it was deliberate policy. The student loan crisis and the pain in “flyover” districts were direct results.
In 2022 we are at an economically delicate moment—trying to control inflation without a serious downturn. A Republican Congress will do exactly what they did last time—shut down government (this time in the name of inflation) to make sure things get worse for 2024. Given the risks of the moment, the consequences can be dire.
We can either elect a Congress interested in avoiding the worst, or we can elect a Congress dedicated to provoking a recession and making sure it lasts.
The public discussion of Biden’s student loan plan seems to be about some other country—certainly not this one.
Much of the discussion takes the point of view that Biden’s plan is a wildly-expensive and unnecessary change, since post-secondary education is functioning the way it always has. And further the plan isn’t sufficiently targeted to the poor, so there is no point in doing it.
In fact post-secondary education in this country is so broken you hardly know where to start. And the people targeted by the plan were so badly screwed by us that we have a responsibility to notice.
Let’s look at the history. The following chart is a point of departure:
It’s obvious from the chart that around 2008 something happened to the cost of college—it took off. A prime ingredient was the George Bush’s 2008 crash, which was a double whammy: states had less money to spend—so tuition went up—and students and their parents had less money to pay it. As we all learned during the Covid crisis, states have limited ability to deal with new expenses, as many are prohibited from running deficits. They need to rely on the federal government to help them out.
However the Republican Congress blocked all stimulus (remember the “balanced budget amendment”) to provoke dissatisfaction for the 2016 election. So there was no help to be had. Unsurprisingly people had to take on new levels of debt. And with Republicans continuing to sabotage the recovery, there were few jobs for these people when they graduated (or didn’t) and went immediately into arrears. Student load debt didn’t grow because students were irresponsible, it grew because government was.
Adding to that, Republicans spent years protecting fraudulent private pseudo-educational institutions because of the supposed superiority of the private sector. At such places you could earn a degree in “culinary arts”, for example, which was considered valueless in any real restaurant. Essentially all students at those institutions incurred monumental levels of debt and no skills. The worst of those have now been shut down, but Betsy DeVos did everything she could to defend them.
As a country we screwed a generation of students. From the numbers on the chart, $10 or $20 thousand seems relevant, but assuredly not profligate. As for inflation, the risk has been exaggerated by false comparison to the stimulus packages. The cost here is budgeted over decades; its current impact is minimal.
However we should be clear that this is a Band-Aid on a God-awful wound, because for the most part things have only gotten worse.
First of all, averaging over all institutions in the country gets a rather diverse mix of good and bad colleges. That’s appropriate for addressing needs of borrowers. However If you want to go to a good institution to get yourself a good job, the numbers are basically twice what’s on the chart: around $20 thousand yearly for a good public institution. For private colleges, we can be more exact since they act as a cartel: $80K. Even applying to these places can cost thousands. So much for equality of opportunity.
What’s more the public university system, instead of being strengthened, is under attack. That’s not just a matter of the well-publicized politization of education, bad as that is. Public funding in many states has been reduced to the point that public colleges are admitting out-of-state (or out-of-country) students in preference to in-state ones, because they need the extra money. That has actually become a major contributor to student loan debt! The financial situation is so dire that colleges are spending more on administrators to raise money than on education itself.
All of that sounds like a hard problem, but as with healthcare, just about every other developed country has found a way to do it. We need to strengthen the public system with necessarily more of a role for federal funding. Public education has to be first-rate and affordable—and available to everyone in every state. We’ve got to banish the preposterous model of education as a severely-limited resource with parents ready to kill to get their children into the right places! In addition we need to limit the size of loans people need to take and be rational about the payback. The Australian system, with payback based on ability to pay, is one working option.
It’s worth stating the obvious fact that with the current cost of education, the only way we’re keeping this country going is by importing foreign graduates (and telling them how much we hate their being here!). We’d have to shut down Silicon Valley otherwise. We should also be clear that when we talk about national security we’re talking not about aircraft carriers but about our national competence in key technologies.
It is also worth stressing the problem is NOT (despite rumblings from both the left and the right) that we’re sending too many people to college. Good jobs need sophisticated training. You can look at the government’s own (or anyone else’s) expectations of the jobs we’re going to need to fill. Sure there should be more specifically vocational training also, but that’s not the answer to the problem we know we’ve got. Also we’ve learned from the Covid experience that online instruction is no silver bullet to replace teachers.
Finally it’s worth responding to the charge that we’re not sufficiently targeting our payments to the poor. The fact is that the only route to equality of opportunity is making sure that there is a first-class system available to everyone. We used to understand that. We were the first to recognize that secondary education needed to be available to everyone. Eventually other countries caught on, because there was a big advantage to the country in doing it.
This has been proven so many times it’s ridiculous to have to state it—education is the backbone of the strength of the country. Despite some rhetoric, there’s nothing either left-wing or right-wing about this. Even Adam Smith knew it—he didn’t futz around wondering how little training poor people could get by with, he wanted universal literacy in the eighteenth century. If we want to succeed as a nation, we need to succeed at education.
This note is occasioned by John McWhorter’s piece in the NY Times, basically praising Clarence Thomas as a thinker who has been too easily dismissed.
While I agree with Mr. McWhorter on some subjects, I think he is very wrong on this one. And his mistake is the same one made by other people about other public figures.
First about Clarence Thomas:
He is someone who has received help every step of his career, but who has nonetheless declared himself self-made. His autobiography is emphatic to the point of absurdity on the subject.
His general philosophy is heavily influenced by that mythology. Like many other pseudo-self-made people (there are admittedly more rich than poor of them), he asserts “I did it, so can anyone else who has what it takes.” No one should be asking government for help. That he sincerely believes this does not make it either true or admirable.
Despite his self-delusions, he has not achieved his success as a thinker. He has achieved success as a propagandist for power. His ideas, however well or badly thought-out, are irrelevant to his current position. He is a tool in the Koch organization’s (and Republican party’s) battle plan. The position being propagated is simple and convenient: we just don’t have to care.
Contrary to what you sometimes read in the papers, he has not driven the Supreme Court to its current position on the extreme right. That is a Koch-managed and funded enterprise that has put a succession of Federalist Society judges on the Court.
We should now talk more generally. There were places and times in the past when people seemed at least worried about selling out. That is, whether they were putting personal advantage above some notion of morality.
We are no longer at that place or time. In the United States (and elsewhere) today, there is no morality stronger than financial success. People don’t need to agonize anymore, because riches are proof of morality. That’s the Clarence Thomas problem, and he is far from the only example.
I’d even put Milton Friedman in that category (along with a good chunk of the Federalist Society). Milton Friedman was certainly capable of understanding the logical flaw in his argument: it’s okay to declare that corporations serve their stockholders—but only if someone else is minding the store. If those same corporations are also running government, then no one is minding the store. Instead he made himself a wealthy and respected genius, again as a propagandist for power.
No one should be venerating propagandists for power, no matter how sincere such people believe themselves to be.
on the outside 